Senate reverses itself from rejection to passage of amendment to repeal VEETC

The U.S. Senate reverses itself on amendment concerning the repeal of the Volumetric Ethanol Excise Tax Credit and import tariffs on ethanol.

What a difference two days makes. The U.S. Senate went from rejecting an amendment to repeal the Volumetric Ethanol Excise Tax Credit (VEETC) and the import tariff on foreign ethanol to passing it. The Feinstein-Coburn amendment passed by a margin of 73 to 27 yesterday.

“The 73 votes sent a powerful message that the days of big subsidies for ethanol are coming to a close,” said Senator Dianne Feinstein (D-CA) in a news release. “We must be serious about addressing the debt and deficit, and this is a good first step.”

Feinstein added, “Ethanol is the only industry I know of that receives a triple crown of government support: its use is mandated by law, it enjoys protective tariffs and oil companies receive federal subsidies to use it. These flawed policies, which cost taxpayers nearly $6 billion a year, must be changed.”

The National Corn Growers Association (NCGA) issued a release, noting that passage of the amendment “represents a tax increase on fuel that will kill jobs in rural America and hit all consumers in the pocketbook.”

The Renewable Fuels Association (RFA) weighed in about this crazy week in Washington. The RFA suggested that the “undercurrent for the Feinstein amendment was the growing battle over the debt ceiling and budget cuts.” It added, “For many Democrats, the vote on the Feinstein amendment was an opportunity to get Republicans on record as supporting the repeal of tax incentives [i.e., oil company subsidies] and raising taxes as a means of deficit reduction.”

The RFA also pointed out that the Senate needs to have a more comprehensive discussion about energy policy. Amen to that.

In a Webinar this morning, Scott Richman, executive director, global biofuels and ag, Hart Energy, predicted that VEETC levels will likely be reduced by the end of 2011, but not allowed to expire completely.

VEETC could be reduced from the current $.45 per gallon to $.20 per gallon or $.15 per gallon, he said. Similarly, the secondary tariff for ethanol imports could be dropped from $.54 per gallon to $.20 per gallon or $.15 per gallon.

“The best the industry could hope for is this will continue for a couple more years, given the tight budget environment,” Richman said.